States Lose $721B If SCOTUS Rules Against Obamacare
Policy + Politics

States Lose $721B If SCOTUS Rules Against Obamacare

Next month, the Supreme Court will decide whether Obamacare enrollees in states that did not set up their own exchanges will continue to have access to federal subsidies.

If the Court rules against the administration in the high-stakes case of King v. Burwell, an estimated 9.8 million could become uninsured in states that rely on the federal exchange,, says a new study from the Urban Institute and the Robert Wood Johnson Foundation (RWJF).  

Related: Four Little Words That Could Kill Obamacare

The report estimates that in the event of such a ruling, the 20 states that did not set up their own exchange or expand their Medicaid programs under the Affordable Care Act would lose an estimated $721 billion in federal funding over the next decade.

Under the ACA, the federal government funds state Medicaid expansion fully for three years, then at 90 percent thereafter. When the law was originally passed, all states were mandated to expand their Medicaid programs.

However, a 2012 Supreme Court ruling gave states the right to opt out of the expansion. Twenty-one states have decided not to expand their programs, with many of their state lawmakers citing cost issues as the number one reason for not expanding.

The study said these 20 states would lose $41 billion in federal spending in 2016 for not expanding Medicaid, and another $21 billion would be lost if the federal subsidies stop flowing.

"States that have not expanded Medicaid have the most to lose in the King v. Burwell decision if they are not already running their own marketplaces because people with incomes between 100 and 138 percent of the federal poverty level would not get any assistance in affording healthcare,” the study said.

Related: Here’s What Might Happen if the Supreme Court Rules Against Obamacare

A decision against the Obama administration threatens to dismantle Obamacare in its entirety. If the Court strikes down federal subsidies, the record-low uninsured rate skyrocketing back up since many healthier people would leave the risk pool, forcing the price of premiums to soar.

Of course, should the Court strikes down the subsidies, Congress could act and amend the law’s language to provide for federal tax credits to continue flowing in states using the federal exchange.

The Republican-controlled Congress isn’t likely to come up with a measure that protects those Obamacare subsidies, however. That would leave it all up to the states, which can pass legislation now to create their own exchanges.

But states have been hesitant, so far, to charge forward and create their own exchanges if they haven’t done so already since the ones that did are facing financial burdens.

So, now states using are bracing for the Court to issue its ruling in June. If they strike down the subsidies, states will have to decide if it’s worth setting up a new state exchange, which could be costly, or to forgo hundreds of millions in federal funding.

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